Shares of Tesla Inc sank 9 percent in early trading as Wall Street analysts worry that the electric carmaker’s growth momentum may have hit a speed bump due to rapid inflation and logistical challenges.
At least five brokerages on Thursday cut their price target on the stock, citing softer car deliveries in 2022. Wedbush Securities made the biggest cut of $60 to bring its target to $300.
“The bullish narrative is clearly hitting a rough patch as Tesla must now prove again to the Street that the robust growth story is running into a myriad of logistics issues as opposed to demand softening,” Wedbush analyst Daniel Ives said.
Tesla stock, which is down 37 percent so far this year, fell to a 16-month low of $202.15 in early trading on Thursday and was set for its worst day since June. By midmorning the stock was up at $209.43, still 5.6 percent below Wednesday’s closing price of $222.04.
In its quarterly earnings report on Wednesday, the company pointed to challenges it was facing on the logistics front and said it might miss its target of 50 percent delivery growth this year.
Tesla Chief Executive Officer Elon Musk said on a post-earnings call that “demand is little harder” than it would otherwise be but the company is confident of a record fourth quarter.
“I wouldn’t say we’re recession-proof, but it’s certainly recession-resilient,” Musk said.
Tesla had been aiming for 50 percent growth this year from the 936,172 cars it delivered in 2021.
Tesla is expanding fast despite global economic jitters, and investors are closely watching for signs that consumer demand is cooling as inflation surges and interest rates climb. Those factors could risk Tesla’s delivery growth target, JP Morgan said.
The electric carmaker’s third-quarter automotive gross margin was 27.9 percent, missing analysts’ estimates and down from 30.5 percent a year earlier.
Revenue for the third quarter was $21.45bn, a record but short of analysts’ estimates of $21.96bn, according to data from Refinitiv.
The company said it had a negative foreign exchange impact of $250m on its earnings as the US dollar strengthened against other major currencies.
“Raw material cost inflation impacted our profitability along with ramp inefficiencies” from Tesla’s new factories in Berlin and Texas and the production of its new breakthrough 4680 batteries, according to Tesla’s statement.
Musk said production of the 4680 battery, which will give Tesla an advantage over its competitors, was gaining traction, although executive Andrew Baglino said, “There are challenges still ahead that we have not yet surpassed, no doubt.”
Still, with a shift to electric vehicles gaining momentum globally, some analysts expect Tesla to be a big beneficiary.
“I don’t question demand as EVs are inevitable,” Roth Capital analyst Craig Irwin said. “[Tesla] has done a great job. There is going to be a shift to EVs.”
Musk also commented on his pending acquisition of Twitter Inc, saying he was excited about it although he said he and other investors were overpaying for the social media company.
Musk has been trying to raise cash to fund his $44bn deal to take Twitter private. Some analysts say Musk may need to sell about $3bn more in stock after the earnings announcement to help fund the deal.